Manfed Comments On Statistics Recently Released

5 September 2000

BULLETIN NO. 7/2000

Brief Comments on Statistics Recently Released

Overseas Trade – June 2000

 Provisional exports (excluding re-exports) grew strongly again in the month to June, with a 28% increase from June 1999. This lifted annual exports to $24,692 million in the year ended June, a 13% increase from the previous year.

 Manufactured BMS exports (excludes meat, dairy and fish products, scoured wood and wood pulp) also increased by 28% in the month of June. Annual exports reached $10,877 million, 20% up on the previous year (an increase of $1,809 million).

Growth in manufactured commodity and ETM exports

 This strong growth in manufactured exports has significantly increased their share of total exports to 44%, an improvement from 43% at the beginning of the year.

 Growth in manufactured commodity exports has been accelerating since October last year but was particularly strong in the June quarter. Exports in June were up $413 million from the March quarter, the largest quarterly increase recorded for this sector. Major components of this increase were:

 sawn timber and panel products (mdf, particle board etc) and value added wood products. There has been strong growth in the export of these value added products (such as mouldings and other components) with a 58% increase in the year to June;

 non ferrous metal products. This is mostly due to a big increase in the value of aluminium exports to Japan; and

 confidentialised commodities. The actual value of the exports of individual commodity products is confidential for 12 months but the total value of products in this group has increased strongly. Newsprint and methanol are among the more important commodities in this group.

 Exports of elaborately transformed manufactures (ETMs) have been accelerating more gradually but strong export growth in June lifted total exports by $366 million in the quarter.

 ETM exports in the year ended June increased to $7,508 million, $1,041 million (16%) up on the previous year. This is the strongest level of growth since March 1992.

 The United States was a major contributor to this improvement in ETM exports. Strong economic growth in the US and a favourable exchange rate resulted in a $387 million improvement in ETM exports, 45.7% up on the previous year.

 This growth in ETM exports to the US has been strong for several years, with the total value more than doubling just in the last four years. Anecdotal evidence suggests this has not come just from an increase in exports by existing traders but also from a significant increase in the number of firms now selling to the US.

 ETM export growth over the last year has also been strong to Asia, with the recovery from the Asian crisis and signs of economic growth in Japan helping to boost demand for New Zealand products.

 The very strong growth in exports to the US is reducing our dependence on Australia, which now takes 36.3% of BMS exports. At its peak, in June 1993, Australia took 44% of BMS exports.

 Export growth to Australia has been the weakest of all our major markets but the weakening exchange rate helped to boost export growth in the June quarter. Pre-GST demand may have also contributed to stronger growth in the quarter.
Destination of manufactured (BMS) exports
(% share by market)

 Import growth has continued at high levels, with manufactured (BMS) imports rising by 19% in the June quarter compared with June 1999. Import values will have been boosted by the fall in the currency and rising commodity prices, especially oil.

 Imports of industrial machinery were up strongly in the June quarter, reflecting strong investment intentions in the December 1999 and March 2000 quarters. It is still too early to assess whether the fall in investment intentions in June will be short term, although the recent fall in the currency will add to the cost of capital equipment purchases.

 Imports from China were very strong in the year ended June, with growth of 32.7% to reach $1,592 million. Apparel is the major item imported from China, reaching $484 million in the year ended June.

 Imports from Australia increased by $1,540 million in the last year (28.8% increase) boosted by the frigate and petroleum imports. There was also strong growth in imports of paper, electronic equipment and furniture.

 Readers should note that the monthly export and import summaries are no longer published in the Manufacturer magazine but are now available on the ManFed web page (www.manufacturers.org.nz).

Source: Statistics NZ

Labour Cost Index – June Quarter

 Overall pay rates (including overtime rates) rose by 0.4% in the June quarter and were 1.6% higher than in June 1999.

 Public sector pay rates continue to increase faster than the private sector, with strong wage growth in the central government sector. Central government sector pay rates rose by 0.9% in the June quarter and 2.6% from June 1999.

 In contrast, local government pay rates rose by 0.1% in the quarter and 1.3% from June 1999, the same annual increase as that recorded by the private sector.

 The survey index is based on the December 1992 quarter and shows that over the period from 1992 to June 1997, central government wage growth lagged behind the private sector. Strong wage growth in the central government sector means that it has now moved ahead of the private sector. By June 2000 the central government index was 1.7% higher than the private sector index.

 Local government pay rates have not followed the growth in central government rates, rising marginally slower than private sector rates.

Salary and wage rates by sector

 The survey shows that 55% of the labour force had no change in their salary or wage rate over the previous 12 months.

 There was wide variation in wage growth in the manufacturing sector. The lowest wage growth of 0.8% was recorded in the wood and paper processing and publishing sectors. The highest wage growth of 1.6% was in the textiles, apparel and machinery sectors.

Source: Statistics NZ

Producers Price Index – June 2000

 Input prices rose by 1.2% in the June quarter, following an increase of 1.4% in the March quarter. On an annual basis, input prices were 5.5% higher than in June 1999.

 Over the past 12 months, the increase in oil prices and the weaker currency have been the two main factors in the rise in input prices. The weaker currency impacts on both imported inputs and locally produced commodity products since the prices of local primary commodities have risen in response to the lower currency.

 The exchange rate fell by 10.4% on a trade weighted basis since June 1999, while against the US dollar, the fall was 11.8%.

 Output prices rose by 1.0% in the June quarter, lifting the annual increase to 3.9%. While some of this rise in output prices will be reflected in the Consumer Price Index (CPI) the rise in the PPI also reflects a significant improvement in export prices over the last 12 months.

 Manufacturing sector input prices rose by 6.0% in the year to June, while output prices rose by 5.9%. This was well below the price rises recorded in Australia where manufacturing input cost have risen by 16.4% and output prices by 7.3%.

 Major commodity price increases in the New Zealand manufacturing sector include:

Annual % Increase

Meat and meat products 10.6
Dairy products 7.8
Seafood products 13.8
Wood products 6.0
Pulp, paper and paper products 14.8
Basic chemicals 9.5
Basic metals 4.9

 Across most sectors of the economy, the rise in input costs is significantly more than the rise in output costs. While this reflects some constraint on margins, it also reflects the much slower wage growth noted above (the inputs index excludes wages and capital expenditure).

 The sector with the biggest margin between input and output prices was transport. The sector faced a 13.1% increase in input costs but output costs increased by just 2.9%.
Sources: Australian Bureau of Statistics, Statistics NZ

Quarterly Employment Survey – May 2000

 Total employment declined marginally in the year to May, with a 0.3% (3,900 jobs) fall in employment.

 Manufacturing employment fell by 6,000 jobs (2.6%) from May 1999.

Source: Statistics NZ

Wholesale Trade Survey – June 2000 Quarter

 Wholesale trade sales in the June quarter were $14,589 million, 12.7% up from June 1999. There was a wide variation in the level of sales growth recorded by different wholesale sectors, reflecting differences in price increases and the widening difference between export and domestic sales.

 The following comparison between rates of growth in December 1999 and June 2000 reinforces the differences between export and domestic sales.

% change from same quarter previous year

Export Focussed December 1999 June 2000

Unprocessed primary product 0.2 11.8
Primary product – food 0.1 25.8
Paper and paper products 12.5 14.9
Metals 4.8 25.4

Domestic Focussed

Food and grocery product 7.6 6.7
Textiles, clothing, footwear 13.5 9.0
Household appliances, furniture 2.8 7.5
Petroleum and petroleum products 19.8 43.2
Building materials, supplies 18.0 -3.1
Pharmaceuticals and chemicals 3.5 3.9
Motor vehicles 15.1 21.1
Machinery and equipment 25.6 0.7

 The slowdown in domestic activity is uneven, with strong growth continuing for some consumer products such as appliances and furniture and motor vehicles. This may reflect the impact of strong growth in farm incomes and good growth in business profits over the previous 12 months.

 The above figures have not been adjusted for the rise in output prices, which across the sector, increased by 6.9% from June 1999.

Source: Statistics NZ

Peter Crawford Phone: 04 496 2813 (wk)
Trade and Economic Analyst

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